Tesla Model Y’s popularity would be tested with end-of-lease tax credit

When does the new Model Y launch in the coming weeks?

Credit: Tesla

Tesla and General Motors are expected to bear the brunt of the elimination of the federal EV tax credit.

The EV Tax Credit plays a vital role for buyers when considering an EV, as it equates to an instant rebate of $7,500 at the time of purchase, while the Rental Tax Credit reduces monthly EV lease payments. Both are helping to boost sales and leases of popular electric vehicles like the Tesla Model Y – especially with the new model coming to the U.S. in March – and Chevy Equinox EV.

Trump wasted no time

The “EV mandate” was Trump’s peak Monday during his acceptance speech in the Rotunda of the U.S. Capitol. “We are going to revoke the electric vehicle mandate,” he said. (A mantra he repeated when speaking to Davos attendees on Thursday.) This was followed by a decree that set the stage for “the elimination of unfair subsidies and other market distortions imposed by the government’s poorly designed policies that favor electric vehicles.

$7,500 Lease Credit – “We Expect to Be Eliminated”

Tesla and General Motors have the most EV models that qualify for the full $7,500 federal tax credit, according to FueConomy.gov. In 2025, GM has five – the Cadillac Lyriq, Cadillac Optiq, Chevrolet Silverado EV, Chevrolet Blazer EV and Chevrolet Equinox. Tesla has four models and nine variants of the Model Y, Model 3, Cybertruck and Model X that qualify.

The Trump administration is seeking to eliminate or modify credits that can be applied directly at the time of transaction. Although the widely known $7,500 federal tax credit for EV purchases is currently safe, the lesser-known lease credit may be the first to go, according to Stephanie Brinley, an analyst at S&P Global Mobility. “We expect the rental part to be eliminated; The purchase tax credit may or may not be,” Brinley said in an email. “Purchase credit requires North American assembly, increasing levels of regionally or locally sourced components and raw materials, and has vehicle pricing prices and buyer incomes,” she said . “The rental tax credit has none of these limitations; The credit goes to the lending agency, which has so far passed on the effect to the consumer, although the regulations do not specifically say they must,” Brinley said.

EV Leasing explodes

Lease credit has become increasingly important to consumers as a result of electric vehicle leasing. According to Experian, almost half (46%) of new electric vehicles are leased. “This makes leasing the most popular option for EV drivers,” Experian said in November.

Here’s how Experian defines rental credit: “While regular federal clean vehicle credits do not apply when you rent, commercial clean vehicle tax credits of up to $7,500 are available to rental companies, which can pass on savings to their customers in the form of incentives. Consumers who benefit from the lease incentives do not have to meet IRS vehicle eligibility or income requirements for regular EV tax credits. »

Leases have become the cheapest way to get into an EV like a Tesla Model Y, Chevy Equinox EV, or Ford Mustang Mach-E. And leases can be applied to electric vehicles that are not eligible for purchase credit. For example, some Ford dealers are offering a $7,500 incentive when leasing a Mach-E. Although dealers don’t always explicitly state that it’s a credit, Ford says on its website that “you may be eligible for a credit of up to $7,500 if you lease a new electric vehicle from Battery Qualified Vehicle (BEV), Plug-In Hybrid Electric Vehicle (PHEV) or Fuel Cell Electric Vehicle (FCEV). »

GM, Tesla ready to eliminate federal credits?

“Our incentive charges are higher than ice, but they are significantly lower than the industry,” said Paul Jacobson, executive vice president and CFO, General Motors, responding to a question about the possible elimination of the credit , at the Barclays Global Automotive and Mobility Tech Conference in November. Ice refers to the internal combustion engine, that is, a gas engine. “We have a lot of flexibility built into our operation. We will continue to work with the incoming administration,” Jacobson said.

Tesla CEO Elon Musk said in July, with his usual bravado, that eliminating the federal electric vehicle tax credit would “only help Tesla” and would be devastating for competitors.

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